Special Needs Estate Planning, Everything You Need to Know

special needs estate planningIf it’s weighing on your mind, our attorneys at Granholm & Gynac in Joliet can talk to you about special needs estate planning.

If you are concerned about what will happen to a special needs child or family member when you pass away, this process can give you peace of mind that your loved ones will be taken care of when you are gone. We can help you draft a legal document so your loved one’s financial and medical issues are taken care of when you pass away.

Special needs can include those family members who are living with a mental or physical disability, as well as those who don’t have the capacity to handle money on their own, have an addiction problem, and receive government benefits among others.

Types of Trusts

We can talk with you about the benefits of a trust as part of your special needs estate planning. If they are receiving government benefits like social security, Medicaid, subsidized housing or others, it’s important to set up your trust so their eligibility is not compromised. If you don’t, the money or assets they inherit may reduce or eliminate the amount of government benefits they receive. Some trust options include:

Special Needs Trusts

These trusts restrict the management of inherited funds from the person who will receive the funds. This trust, also known as a D4A trust, must follow the specific needs of your loved one and the trustee of the trust will give funds on a discretionary basis. This kind of trust assures your special needs family member will still qualify for government benefits.

Trusts Set up with the Dependent’s Assets

A trust can be included in special needs estate planning for family members under the age of 65, who get money from a lawsuit, an inheritance, or other ways. The trust makes sure that just because they get a large amount of money it doesn’t jeopardize their eligibility for government benefits. But you should keep in mind that with this trust when the dependent dies, the state Medicaid agency gets any money left in the trust for any support the state provided to your loved one.

Trusts Created with assets from Parents or Grandparents

This trust is created by parents or grandparents who want to leave money for a special needs dependent but want them to still be able to get government benefits. The creators of the trust appoint a trustee who controls it. The trustee cannot give money directly to the dependent but can pay for certain items and services not covered by the dependents’ monthly SSI income. Upon the death of your loved one, whatever assets are left in the trust can be distributed according to the creator’s wishes spelled out in the trust.

Pooled Special Needs Trusts

This kind of trust allows nonprofit organizations to set up and manage pooled trusts for people with special needs, often for people older than 65. There is no charge to set up or administer this kind of trust, and no tax return is required for it. However, transferring money out of this trust can result in certain penalties. When your loved one dies, the remainder of the money in the trust stays in the fund to help other special needs people who are cared for by the nonprofit organization. We can help you with this portion of special needs estate planning.

Special-purpose Trusts

Special-purpose trusts can provide for loved ones with addiction issues or mental health concerns with protection.

Impenetrable Trusts

The impenetrable trust is made for your loved one who is irresponsible with money, often makes unwise choices with unscrupulous friends, has creditor claims, or may have untrustworthy marital partners.

Discretionary Trusts

If the restrictions imposed by other available trusts prevent the flexibility you need to meet the needs of your loved one, you can choose to create a general discretionary trust. A discretionary trust allows the trustees to use the money in any way that benefits your loved one. However, keep in mind that discretionary trusts may disqualify your special needs dependent from government benefits.

A Few More Tips for Special Needs Estate Planning

Name a Guardian

In whatever document you choose, make sure you name a legal guardian for your special needs family member. If you don’t, a judge will decide who takes care of your loved one.

Letter of Intent

Although not a legal document, a letter of intent is a step-by-step guide for how to care for your special needs family member.  It can include the details of their daily routine, their likes, and dislikes, their medical procedures, a full medical history, contact information for their medical providers.

Update your plan from time to time

Your family member’s needs and your financial situation may change from time to time. So, don’t forget to update your estate plan. You may want to consider building some flexibility into your estate plan through a trust, based on your specific situation. You should probably review your plan every three to five years or when there is a significant change.

Let our attorneys at Granholm & Gynac in Joliet help guide you through the vitally important special needs estate planning process. That way you can be sure that your loved one will be cared for when you’re no longer here to look after them.

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